Tuesday, February 07, 2012

Caterpillar Highlights Failed Policies

The Caterpillar fiasco is another example of the failed relationship between government, corporations and community. Rather than get lost in the minutiae of the Caterpillar story, a wide angle lens reveals a disturbing picture of corporate greed, negotiating in bad faith, the free market economy at its absolute worst. We can debate certain points all day, but the notion of a company making record profits, upper management receiving record pay contrasted with demanding employees take a 50% wage cut, demonstrates obscene disconnect. This wasn't a GM or Chrysler- companies teetering on extinction require deep worker sacrifice- this is a company flooded with cash, a historic high water mark, running on all cylinders, giving the SHAFT to the people who contributed to its success.

The federal and provincial government have assisted Caterpillar, not the least of which corporate taxcuts. The wider story, corporate taxes have failed to deliver as advertised, chose your empirical measure, one is hard pressed to justify, left to future theoretical proclamation. Perhaps the Caterpillar story highlights the need to have "strings attached" to government initiatives which benefit corporate Canada. Perhaps corporate taxcuts require certain criteria to qualify, this type of regime is quite common with other government allocations. Rather than a blank check scenario, wherein government is left to HOPE, money should be tied to commitments, thresholds, tax breaks a function of a credible plan to incorporate those savings.

Is it so offensive to say to Corporation A, you can qualify for a certain corporate tax rate if you demonstrate reinvestments, if you can show productivity gains, if you address employment? Should said corporation show no interest in meeting certain thresholds, they simply don't qualify for the "break" and they lose the opportunity to redeploy DIRECTED capital within their organization. Given all these stipulations still ADVANCE corporate SELF INTEREST, where is the downside to said corporation, within a qualification system? Again, review many, many government programs and you will see merit based systems, you will see money doled out if certain requirements are met, quite common, quite fair as well.

Caterpillar represents a scenario where everyone except the corporation has acted in "good faith". Government has assisted, helping that corporation operate in a more healthy business climate. The employees have assisted, helping to make the corporation incredibly profitable, part of the success no question. Caterpillar in turn has said, thanks for the public money, the tax breaks, thanks for making quality product employee, but we're out of here, despite RECORD profits, despite a JUGGERNAUT company with more cash than it can spend, we flip you the BIRD. This whole story highlights the desperate need for corporate responsibility, the missing variable in this entire equation.

The Caterpillar example is sensational, but it is also symptomatic of a larger problem with the way governments approach corporate "citizens". The time has come for "show me" regimes, wherein corporations who want the benefits of government measures must demonstrate where that money will be redeployed, provide detailed plans to show how corporate taxes will benefit the company, as well as achieve the benefits these measures were intended to provide. Rather than Jim Flaherty expressing "frustration" that corporations aren't reinvesting as hoped, we have concrete assurances tied to certain tax rates. A strings attached system would garner the wanted reinvestment, employment, productivity, because there is still self interest, the company still benefits through compliance, the alternative is less attractive. It's time for society to take back the reigns, rather than rely on incapable entities to do the right thing, we should leverage some control, in a way that allows benefit, but also brings responsibility.

4 comments:

Why is anyone surprised? Corporations are legally required to act as sociopaths - to pursue maximum profit no matter what. Would you blame the tiger if you walked into its territory and got eaten? Its going to happen. Its going to happen again. More corporations will pretend to care about their workers to get tax breaks, and fire them all the moment that another jurisdiction offers better tax breaks (or in the case of Indiana, offers to help crush any union presence). Its time to start treating them as the danger to humanity that they are. Yes, they might do some good things if its in their interests, and I wouldn't wish for their extinction, but its only by coincidence when they happen to do things that are good for The People - not by design.

It is really quite ironic for an ideology that is so attached to personal responsibility that corporations are always given a free pass to act irresponsibly. Even more astonishing is that we have a government that got elected for its "job creation" line sits by and watches thousands of good paying jobs disappear and do nothing more than express "frustration". Some really tough questions need to be asked of this government and we need to stop letting them away with repeating nice warm and fuzzy talking points on the economy and job creation.

If it's any consolation, Caterpillar may ultimately be shooting themselves in the foot with this move. General Electric has been the #1 locomotive builder for over 30 years now. They outpace EMD in reliability and sales numbers show it.

Cat's been trying to get into the locomotive business for years but their tractor-grade diesel motors suck, so with their mountains of money they bought EMD to get the GM diesel and electronic patents.

The London plant was never part of the plan. They only wanted the technology, and all along plotted to build everything in non-union shops ...because that's the Cat way.

This move to bust unions; rather than to invest in R&D, improve manufacturing processes and pay workers what they're worth; could ultimately kill EMD. This is entirely the wrong move when your main competitor literally has their foot on your throat.

I feel for the London employees. They're pawns in a stupid corporate maneuver, managed by a guy with a bachelors in marketing and a personal history of running a scrap yard: